DJ China May Save $325 Bln In '09 On Commodity Imports - ING

China is forecast to amass a $325 billion trade surplus in 2009 from savings on commodity imports, ING Wholesale Banking said in a note Thursday.

The government's concern with managing such a large surplus while maintaining exchange rate stability prompted central bank Governor Zhou Xiaochuan's proposal to replace the U.S. dollar with International Monetary Fund Special Drawing Rights as a reserve currency, said Tim Condon, head of research and chief Asia economist for the research house.

Condon argued that the recent record monthly import volumes of key commodities cut against an established trend and are unlikely to last. The research house tracked five key commodities: oil, coal, copper, aluminum and iron ore.

"We do not think the surge will continue," the note said. "The volume of commodity imports will grow at the same 15% pace of the past four years."

Condon said the recent import surge is a departure from a trend where the direction of commodity prices has moved in tandem with commodity imports.

With global prices still sagging, the volume of recent commodity imports surged 31% on month in February and 17% on month in March, to their highest level ever, the note said.

"Imports of copper and iron ore hit record highs in February and again in March and imports of coal and aluminum hit records in March," Condon wrote. "March oil imports also were the second highest on record."

But this counter trend can't last, he said.

If oil prices remain at the April average for the rest of year, and assuming the oil price is a good proxy for commodity prices, ING forecast China's total trade surplus would reach $325 billion this year, $28 billion more than last year.

The proposal to move away from the U.S. dollar as a reserve currency had roots in the question of how to manage this projected surplus, ING said.

Zhou's proposal has a greater chance of becoming reality now that it is on the G20 agenda, said the research house.

"The Chinese authorities' unease about their significant exposure to the U.S. dollar is manifest," the note said. "They cannot hedge the exposure in the market without putting depreciation pressure on the U.S. dollar."

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